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Do Individuals Recognize Cascade Behavior of Others? - An Experimental Study -

  • Tim Grebe
  • Julia Schmid
  • Andreas Stiehler

In an information cascade experiment participants are confronted with artificial predecessors predicting in line with the BHW model (Bikchandani et al., 1992). Using the BDM (Becker et al., 1964) mechanism we study participants' probability perceptions based on maximum prices for participating in the prediction game. We find increasing maximum prices the more coinciding predictions of predecessors are observed, regardless of whether additional information is revealed by these predictions. Individual price patterns of more than two thirds of the participants indicate that cascade behavior of predecessors is not recognized.

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File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2006-079.pdf
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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2006-079.

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Length: 24 pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2006-079
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